Euronav NV reported its non-audited financial results for the first quarter 2017.

Paddy Rodgers, CEO said: “Q1 2017 was a confirmation of our thesis: short term challenges but a positive medium structure building for the tanker sector. Asset prices look to be bottoming out in our view confirmed by emerging buying interest from industrial players. However, short term outlook retains a cautious tone with nearly a quarter of the large tanker order book scheduled for delivery during Q2 2017 and newbuilding contract activity picking up short term albeit only in the VLCC sector. Euronav retains substantial balance sheet capability and fixed income visibility to navigate through a period of lower freight rates and/or to take advantage of expansion opportunities. The duration of the challenging freight rate environment will be entirely dependent on the number of additional orders to build new ships that are not needed by the market.”

For the first quarter of 2017 the Company had a net profit of USD 34.3 million (first quarter 2016: USD 113.5 million) or USD 0.22 per share (first quarter 2016: USD 0.72 per share). Proportionate EBITDA (a non-IFRS measure) for the same period was USD 106.1 million (first quarter 2016: USD 185.0 million).

The average daily time charter equivalent rates (TCE, a non IFRS-measure) can be summarized as follows:

In USD per day

First quarter 2017

First quarter 2016

VLCC

Average spot rate (in TI pool)***

40,528

60,638

Average time charter rate*

41,147

40,847

SUEZMAX

Average spot rate**

24,000

38,386

Average time charter rate*

23,880

32,251

*Including profit share where applicable

** Excluding technical offhire days

*** Euronav owned ships in TI Pool

EURONAV TANKER FLEET

Euronav took delivery of two VLCCs (acquired as resales of contract), the Ardeche (2017 – 298,642 dwt) and the Aquitaine (2017 – 298,768 dwt), from Hyundai Heavy Industries – Samho yard, South Korea on 12 January and on 20 January respectively.

FINAL DIVIDEND 2016

As reported on 16 March 2017, Euronav will propose to the shareholders to approve a final dividend covering the second half of the 2016 financial year of USD 0.22 per share during the Annual General Meeting of Shareholders that will be held in Antwerp on 11 May 2017. Following the approval, it is anticipated that the ex-dividend date shall be 22 May 2017 with a record date of 23 May 2017 and a payent date of 31 May 2017.

TANKER MARKET

The tanker market saw a number of features during the first quarter which supported our thesis that the market, whilst facing short term challenges, continues to build a positive medium term structure.

On the positive side demand for crude oil remains robust. The recently adjusted IEA forecast for 2017 at 1.3 million bpd growth still drives a requirement equivalent to an additional 35-45 VLCCs of shipping demand for 2017 alone depending on sourcing as most demand growth is from the Far East and therefore will need to be shipped.

Ton miles retains an important dynamism within large crude tanker markets and the first quarter saw further establishment of a key trend, namely USA exports. The level of crude oil exports grew substantially during the first quarter of 2017 to average 758,000 barrels per day (versus 417,000 per day in Q1 2016 (source: IEA)). The breakout in this trend during the first quarter could be the start of a more structural development of a trade lane from the USA to China. This dynamic, combined with the continued growth of a highly flexible oil production source from USA shale, will continue to be important positive factors in the expansion of ton miles to the benefit of the tanker sector.

Asset prices continue to adjust to the new structure of restricted financing. 2016 saw average tanker values fall by approximately 25% (source: Clarksons) – a process which appears to have stabilized during the first quarter of 2017. Our belief is that asset values are approaching a low point supported by reduced immediate newbuilding slots capacity at the yards and less speculative buyers. However, whilst asset prices look to have stabilized this does not necessarily translate into instantly rising values but provides an opportunity for further consolidation by those with access to funding such as Euronav.

However, there are some negative data points that have emerged. According to Clarksons, 15 new VLCCs (zero Suezmax orders since October) have been ordered during the first quarter which is a disappointing development given order flow was zero over the last four months of 2016.

The biggest challenge facing the tanker market at present is the concentration of tanker deliveries. The first quarter saw 27 VLCC equivalents delivered to the global fleet (based on VLCC and Suezmax deliveries only) a number which will be repeated during the second quarter. Absorption of these new, un-vetted vessels will occur during a seasonally weak period and will provide a sustained challenge for tanker operators over the summer months. That said the second quarter of 2017 represents the peak concentration period of new build capacity impacting the market.

Otherwise crude oil markets remain “close to balance” according to the most recent IEA report. Consensus forecasts expect inventory levels to reduce toward more normalized levels during the rest of 2017. This is a supportive backdrop for tanker markets as global oil supply is anticipated to rise driven by USA shale, increased production in core producing nations and reduction in outages in areas such as Nigeria and Libya. Clearly any extension of the six month OPEC production cut will not be beneficial for tankers but medium term supply trends remain constructive and lower inventories with stable demand should result in growing shipments.

We encourage investors to visit our website and access our presentations which are updated regularly at http://investors.euronav.com. In particular we would draw attention to our annual special report which we include in our annual report every year. This year’s subject looks at the vetting process in respect of the large tanker sector.

OUTLOOK

Continued robust demand for crude coupled with a positive dynamic of increased ton miles driven by USA crude exports of shale oil compensated nicely for the OPEC/non-OPEC agreement on production cuts. Less positive however, is the return of VLCC newbuilding orders in the first quarter. This implies a lower for longer tanker freight market given the already high concentration of new tanker capacity due for delivery primarily in 2017 but also in 2018. This is likely to generate challenging freight rate conditions during the remainder of 2017.

Euronav remains confident about the medium term prospects for our business and the tanker sector generally. With the lowest leverage in the large tanker sector and access to over USD 620 million of liquidity Euronav is well positioned to navigate the cycle – to be strategically opportunistic whilst remaining exposed to any potential upside from an improved freight rate environment.

So far during the second quarter of 2017, the Euronav VLCC fleet operated in the Tankers International Pool has earned about 32,000 USD and 42% of the available days have been fixed. Euronav’s Suezmax fleet trading on the spot market has earned about 22,000 USD per day on average with 47% of the available days fixed.

Full Report

Source: Euronav NV